Taxables take spotlight as ‘supply desert’ carries on

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Municipals will see yet another week of sub-$4 billion issuance, as taxables take the top spot on the calendar.

Ipreo estimates volume will grow to $3.69 billion, from the revised total of $2.11 billion sold in the past week, according to updated figures from Thomson Reuters. The calendar for the week ahead is composed of $2.95 billion of negotiated deals and $738 million in competitive sales.

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There are eight deals scheduled of $100 million or larger, with the two biggest being taxable. This will mark the second week in a row and sixth time in the past eight weeks of issuance below $4 billion.

“We will continue to see a supply desert," said Dan Heckman, senior fixed income strategist at U.S. Bank Wealth Management. A gentle rise in taxable issuance will continue to evolve for the rest of the year, he said.

“There is more than one factor that plays into it, but I think the main takeaway is that with reduction in corporate tax rate and personal tax rates, issuers may find still relatively low interest rates and get a larger, broader group of buyers by going into the taxable space," Heckman said.

“If we can get through tax season, with things remaining how they are with a stable Treasury market, the muni market could get a lot stronger,” he said. “I would not be surprised if that happened. Investors are going to continue to see the value of munis.”

One New York trader noted the $3.7 billion of next week's expected issuance is above this week's total, but below the 2018 weekly average of $4.3 billion and well below the 2017 weekly average of $7.3 billion.

“Munis have momentum going into next week for sure,” he said. “We rallied yesterday and although there was not a lot of action this week, the deals that did come saw dense demand.”

The week will be cut down to four trading sessions, as the market will be closed on Friday in observance of Good Friday.

Barclays is scheduled to price the George Washington University’s $793 million of taxable, corporate CUSIPs on Tuesday. The deal is rated A1 by Moody’s Investors Service and A-plus by S&P Global Ratings.

Morgan Stanley is slated to price a combined total of $1.29 billion in two deals for Sutter Health, both on Tuesday. There will be $684.475 million taxable deal and $606.255 million of tax-exempts.

Loop Capital Markets is expected to price the state of Connecticut’s $617 million of GO and GO refunding bonds on Wednesday, following a one-day retail order period. The deal is rated A1 by Moody’s, A-plus by S&P and Fitch Ratings and AA-minus by Kroll Bond Rating Agency.

Lipper: Muni bond funds saw inflows
Investors in municipal bond funds put cash into the funds for the third consecutive week, according to Lipper data released on Thursday.

The weekly reporters saw $445.450 million of inflows in the week of March 21, after inflows of $339.142 million in the previous week.

Exchange traded funds reported inflows of $40.074 million, after inflows of $76.237 million in the previous week. Ex-ETFs, muni funds saw $405.377 million of inflows, after inflows of $262.905 million in the previous week.

The four-week moving average remained positive at $150.101 million, after turning green at $70.049 million in the previous week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.

Long-term muni bond funds had inflows of $152.371 million in the latest week after inflows of $181.790 million in the previous week. Intermediate-term funds had inflows of $358.004 million after inflows of $152.733 million in the prior week.

National funds had inflows of $502.293 million after inflows of $356.119 million in the previous week. High-yield muni funds reported inflows of $65.345 million in the latest week, after inflows of $110.948 million the previous week.

Week's actively traded issues
Some of the most actively traded bonds by type in the week ended March 23 were from Puerto Rico, New York and Wisconsin issuers, according to Markit.

In the GO bond sector, the Puerto Rico 8s of 2035 traded 38 times. In the revenue bond sector, the New York City Transitional Finance Authority 3.625s of 2047 traded 70 times. And in the taxable bond sector, the Wisconsin Public Finance Authority 4.269s of 2040 traded 28 times.

Week's actively quoted issues
Puerto Rico, New York and California names were among the most actively quoted bonds in the week ended March 23, according to Markit.

On the bid side, the Puerto Rico GO 8s of 2035 were quoted by 54 unique dealers. On the ask side, the New York City taxable 5.237s of 2021 were quoted by 158 dealers. And among two-sided quotes, the California taxable 7.55s of 2039 were quoted by 23 unique dealers.

California, New York and Texas were the states with the most trades, with the Golden State taking 16.056% of the market, the Empire State taking 15.669% and the Lone Star State taking 9.428%.

Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Click here for a brief tour of the Workstation, or contact Vanessa Kim at 212-803-8474 for more information.

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Primary bond market Sell side Municipal bond funds Secondary bond market State of Connecticut Commonwealth of Puerto Rico City of New York, NY State of California New York City Transitional Finance Authority
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